<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(XX) Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the Quarterly Period ended February 28, 1995 or
( ) Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from _____________ to ____________
Commission file number 1-8831
FEDDERS CORPORATION
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
Delaware 22-2572390
(State of incorporation) (I.R.S. Employer Identification No.)
</TABLE>
<TABLE>
<S> <C>
505 Martinsville Road, Liberty Corner, NJ 07938
(Address of principal executive offices) (Zip Code)
</TABLE>
Registrant's telephone number, including area code: 908/604-8686
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
The registrant has outstanding 18,988,099 shares of Common Stock,
10,638,679 shares of Class A Stock (which is immediately convertible into
Common Stock on a share-for-share basis upon conversion of all of Class B
Stock) and 2,267,906 shares of Class B Stock (which is immediately
convertible into Common Stock on a share-for-share basis) as of March 31,
1995.
<PAGE> 2
FEDDERS CORPORATION
INDEX
<TABLE>
<CAPTION>
Page
Number
<S> <C>
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Statements of Operations 3
Consolidated Balance Sheets 4-5
Consolidated Statements of Cash Flows 6
Notes to Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 8-9
Part II OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 10
SIGNATURE 11
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<PAGE> 3
PART I FINANCIAL INFORMATION
FEDDERS CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(amounts in thousands, except per share data)
(unaudited)
<TABLE>
<CAPTION>
SECOND QUARTER SIX MONTHS
ENDED FEBRUARY 28, ENDED FEBRUARY 28,
1995 1994 1995 1994
<S> <C> <C> <C> <C>
Net sales and other income $ 72,357 $ 36,959 $ 92,482 $ 47,486
Cost of sales 58,671 29,249 74,490 37,702
Selling, general and
administrative expense 6,325 5,409 11,928 10,607
-----------------------------------------
64,996 34,658 86,418 48,309
-----------------------------------------
Operating income (loss) 7,361 2,301 6,064 (823)
Net interest expense (667) (1,138) (810) (2,025)
-----------------------------------------
Income (loss) before
income taxes 6,694 1,163 5,254 (2,848)
Federal, state and foreign
income tax (benefit) 1,127 35 904 (85)
-----------------------------------------
Income (loss) before
cumulative effect of
an accounting change 5,567 1,128 4,350 (2,763)
Cumulative effect of an
accounting change - - - 1,780
-----------------------------------------
Net income (loss) $ 5,567 $ 1,128 $ 4,350 $ (983)
=========================================
Earnings per share:
Income (loss) before
cumulative effect of
an accounting change $ 0.17 $ 0.04 $ 0.13 $ (0.09)
Cumulative effect of an
accounting change - - - 0.06
-----------------------------------------
Net income (loss) per share $ 0.17 $ 0.04 $ 0.13 $ (0.03)
=========================================
</TABLE>
See accompanying notes
<PAGE> 4
FEDDERS CORPORATION
CONSOLIDATED BALANCE SHEETS
(dollar amounts in thousands, except share data)
(unaudited)
<TABLE>
<CAPTION>
February 28 August 31 February 28
1995 1994 1994
<S> <C> <C> <C>
ASSETS:
Current assets:
Cash $ 2,383 $ 34,869 $ 1,780
Accounts receivable (less
allowance of $898, at
February 28, 1995, $744
at August 31, 1994 and
$1,009 at February 28, 1994) 31,571 12,840 22,409
Inventories:
Finished goods 51,801 9,596 39,166
Work in process 3,535 1,242 1,698
Raw materials and supplies 18,045 7,210 8,754
----------------------------------
73,381 18,048 49,618
Prepaid expenses 888 674 776
----------------------------------
Total current assets 108,223 66,431 74,583
Property, plant and equipment
at cost:
Land and improvements 1,351 1,363 1,375
Buildings 12,313 12,005 11,917
Machinery and equipment 48,820 47,146 47,157
----------------------------------
62,484 60,514 60,449
Less accumulated
depreciation 33,730 33,142 28,270
----------------------------------
Net property, plant and
equipment 28,754 27,372 32,179
Other assets 6,914 6,850 8,009
----------------------------------
$143,891 $100,653 $114,771
==================================
</TABLE>
See accompanying notes
<PAGE> 5
FEDDERS CORPORATION
CONSOLIDATED BALANCE SHEETS
(dollar amounts in thousands, except share data)
(unaudited)
<TABLE>
<CAPTION>
February 28, August 31, February 28
1995 1994 1994
<S> <C> <C> <C>
LIABILITIES & STOCKHOLDERS' EQUITY:
Current liabilities:
Short-term borrowing $ 17,245 - $ 24,698
Current portion of long-term debt 599 $ 616 2,233
Accounts payable 25,293 5,315 21,440
Accrued expenses 22,536 22,127 12,749
-----------------------------------
Total current liabilities 65,673 28,058 61,120
Long-term debt 17,426 17,327 24,368
Deferred income taxes 1,175 1,175 -
Other long-term liabilities 4,928 4,776 3,049
Stockholders' equity:
Common Stock, $1 par value,
60,000,000 shares authorized,
19,642,509, 19,641,659 and
19,452,000 issued at February
28, 1995, August 31, 1994 and
February 28, 1994 respectively 19,643 19,642 19,452
Class A Stock, $1 par value,
30,000,000 shares authorized
10,634,929, 10,625,029 issued at
February 28, 1995 and September
9, 1994, respectively 10,635 10,625 -
Class B Stock, $1 par value,
7,500,000 shares authorized,
2,267,906 issued at February 28,
1995, 2,268,206 August 31, 1994 and
February 28, 1994, respectively 2,268 2,268 2,268
Additional paid-in capital 52,226 51,423 49,503
Retained earnings (deficit) (20,414) (24,764) (36,111)
Cumulative translation adjustment (148) (169) 88
Notes due on Common Stock purchases (555) (742) -
-----------------------------------
63,655 58,283 35,200
Less-treasury stock, at cost (8,966) (8,966) (8,966)
-----------------------------------
Total stockholders' equity 54,689 49,317 26,234
-----------------------------------
$143,891 $100,653 $114,771
===================================
</TABLE>
See accompanying notes
<PAGE> 6
FEDDERS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(amounts in thousands)
(unaudited)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
FEBRUARY 28
1995 1994
<S> <C> <C>
Cash flows from operations:
Net income (loss) $ 4,350 $ (983)
Adjustments to reconcile net income
to net cash used in operating activities:
Depreciation and amortization 1,909 2,763
Effect of book/tax NOL utilization 778 -
Changes in operating assets and liabilities:
Accounts receivable (18,731) (13,508)
Inventories (55,333) (30,348)
Other current assets (214) 4,023
Other assets (116) (455)
Accounts payable 19,978 16,266
Accrued expenses 409 (4,435)
Other long-term liabilities 152 (6,059)
Other 21 218
--------------------
Net cash used in operations (46,797) (32,518)
--------------------
Cash flows from investing activities:
Additions to property, plant and equipment (3,152) (2,425)
Disposals of property, plant and equipment 200 12
--------------------
Net cash used in investing activities (2,952) (2,413)
--------------------
Cash flows from financing activities:
Increase in short-term borrowings 17,245 24,698
Repayments of long-term debt (205) 690
Proceeds from stock options exercised 223 2,770
--------------------
Net cash provided by financing activities 17,263 28,158
--------------------
Net decrease in cash and cash equivalents (32,486) (6,773)
Cash and cash equivalents at
beginning of period 34,869 8,553
--------------------
Cash and cash equivalents at end of period $ 2,383 $ 1,780
====================
Supplemental disclosure:
Interest paid $ 618 $ 632
Net income taxes refunded (250) -
</TABLE>
See accompanying notes
<PAGE> 7
FEDDERS CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
A. In December 1994, the Company's revolving credit facility was increased
from $30 to $40 million.
B. Earnings per share are computed by dividing net income by the weighted
average number of shares of Common Stock, Class B Stock and other common
stock equivalents outstanding: 34,495,000 and 31,473,000 in the second
quarter of 1995 and 1994, and 32,374,000 and 31,019,000 for the six-month
period ending February 28, 1995 and 1994, respectively. Prior-period
earnings per share have been restated to reflect the Class A Stock dividend
distributed in September 1994.
C. Pursuant to the Company's stock option plans, options to purchase 7,800
shares of Common Stock were exercised during the first six months of fiscal
1995.
D. On March 30, 1995, the Company announced it will fully redeem the
principal amount outstanding of $13,211,000, 100% par value, plus accrued
interest, on its 5% convertible subordinated debentures due May 1, 1996.
The Company announced it also will buy-out on May 31, 1995 an equipment
lease which expires in February 1996 for approximately $3,000,000.
E. The financial information included herein is unaudited; however, such
information reflects all adjustments which, other than the cumulative
effect of an accounting change, consists solely of normal recurring
adjustments which are, in the opinion of management, necessary for a fair
statement of results for the interim periods. The Company's business is
seasonal. Operating results for the three and six month periods ending
February 28, 1995 are not necessarily indicative of the results that may be
expected for the fiscal year ending August 31, 1995.
<PAGE> 8
Item 2. Management's Discussion and Analysis of Results of
Operations and Financial Condition
The following is management's discussion and analysis of certain
significant factors which affected the Company's financial position and
operating results during the periods included in the accompanying
consolidated financial statements.
Second Quarter
Results of Operations
<TABLE>
<CAPTION> Second Fiscal Quarter Six Months
Operating Results
as Percent of Sales 1995 1994 1995 1994
<S> <C> <C> <C> <C>
Gross Profit 18.9% 20.9% 19.5% 20.6%
Selling, General
and Administrative 8.7% 14.6% 12.9% 22.3%
Operating Income 10.2% 6.2% 6.6% (1.7)%
Net interest Expense (.9)% (3.1)% (.9)% (4.3)%
Pre-tax Income 9.3% 3.1% 5.7% (6.0)%
</TABLE>
Net sales in the second quarter ended February 28, 1995 amounted to $72.4
million, an increase of 96.0% from $37.0 million in the same period a year
earlier. The sales gain was due to greater volume of private-label and
distributor orders. The gross profit margin in the second quarter was
affected by the customer mix.
Selling, general and administrative expenses declined as a percentage of
sales to 8.7% from 14.6% as a result of the increased sales volume.
Net interest expense decreased to $667,000 from $1.1 million as a result of
lower short-term borrowing during the quarter and reduced long-term debt.
Pre-tax income for the quarter increased to $5.6 million, or 7.7% of net
income, compared to $1.1 million, or 3.1% of net sales in the prior year.
In the second quarter, the effective tax rate increased to 16.8% from 3% in
the prior year as the Company expects to utilize its tax loss carryforwards
during the fiscal year.
Six Months
For the first six months of fiscal 1995, sales were $92.5 million, an
increase of 94.8% from $47.5 million for the same period in fiscal 1994.
The sales increase for the six-month period is due primarily to increased
volume of private label and distributor orders.
<PAGE> 9
Gross profit margin decreased slightly during the fiscal 1995 period as a
result of customer mix.
Selling, general and administrative expenses declined as a percentage of
sales as a result of the increased sales volume.
Net interest expense decreased as a percentage of sales to .9% from 4.3% in
the prior year period. The decrease is due to lower short-term borrowing,
reduced long-term debt and increased interest income from cash investments.
In the six month period, the Company's net income was $4.4 million compared
with a net loss of $983,000 a year ago. The 1994 results included a one-
time favorable cumulative effect of an accounting change amounting to $1.8
million from the adoption of Statement of Financial Accounting Standards
("SFAS") No. 109, "Accounting for Income Taxes." The effective tax rate
increased to 17.2% in the six month period versus 3% in the prior year as
the Company expects to utilize its tax loss carryforwards.
Liquidity and Capital Resources
Working capital requirements of the Company are seasonal with cash balances
peaking in August and the greatest utilization of its lines of credit
occurring early in the calendar year. During the second quarter, the
Company utilized working capital lines and cash to produce finished goods
to meet demand. As a result, inventories were $73.3 million at February
28, 1995 compared with $49.6 million at February 28, 1994. Accounts
receivable increased as a result of the higher sales volume.
In December 1994, the Company increased its working capital credit facility
from $30 million to $40 million to provide additional seasonal working
capital, reduced the rate of interest on the facility to the prime plus 2%
and extended the facility through December 1997. Management believes that
the Company's earnings and borrowing capacity are adequate to meet the
needs of its operation and long-term credit requirements, including capital
expenditure and debt maturities. At February 28, 1995, short-term
borrowing was $17.2 million.
On March 30, 1995, the Company announced that as a result of seasonally
strong sales and cash flow it will fully redeem, on May 5, 1995, the
$13,211,000 principal amount outstanding at 100% of par value plus accrued
interest, on its 5% convertible subordinated debentures due May 1, 1996.
The debentures are convertible into the Company's Common Stock at $34.00
per share, which right shall terminate at the close of business May 4, 1995.
The Company announced it will also buy-out on May 31, 1995 an equipment
lease which expires in February 1996, for approximately $3.0 million.
<PAGE>
<PAGE> 10
PART II OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(b)Reports on Form 8-K
No reports on Form 8-K were filed during the quarter for which this report
is filed.
<PAGE>
<PAGE> 11
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
FEDDERS CORPORATION
By /s/Robert L. Laurent, Jr.
Robert L. Laurent, Jr.
Executive Vice President,
Finance & Administration
Date Signing both in his capacity as
Executive Vice President on
behalf of the Registrant and as
Chief Financial Officer of the
Registrant
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000744106
<NAME> FEDDERS CORPORATION
<MULTIPLIER> 1000
<S> <C> <C> <C> <C> <C>
<PERIOD-TYPE> 3-MOS 3-MOS 6-MOS YEAR 6-MOS
<FISCAL-YEAR-END>AUG-31-1995 AUG-31-1994 AUG-31-1995 AUG-31-1994 AUG-31-1994
<PERIOD-END> FEB-28-1995 FEB-28-1994 FEB-28-1995 AUG-31-1994 FEB-28-1994
<CASH> 0 0 2,383 34,869 1,780
<SECURITIES> 0 0 0 0 0
<RECEIVABLES> 0 0 32,469 13,584 23,418
<ALLOWANCES> 0 0 (898) (744) (1,009)
<INVENTORY> 0 0 73,381 18,048 49,618
<CURRENT-ASSETS> 0 0 108,223 66,431 74,583
<PP&E> 0 0 62,484 60,514 60,449
<DEPRECIATION> 0 0 (33,730) (33,142) (28,270)
<TOTAL-ASSETS> 0 0 143,891 100,653 114,771
<CURRENT-LIABILITIES>0 0 65,673 28,058 61,120
<BONDS> 0 0 17,426<F1> 17,327<F1> 24,368<F1>
<COMMON> 0 0 32,546<F1> 32,535<F2> 21,720<F2>
0 0 0 0 0
0 0 0 0 0
<OTHER-SE> 0 0 22,143 16,782 4,514
<TOTAL-LIABILITY-AND-EQUITY>0 0 143,891 100,653 114,771
<SALES> 72,357 36,659 92,482 0 47,486
<TOTAL-REVENUES> 72,357 36,659 92,482 0 47,486
<CGS> 58,671 29,249 74,490 0 37,702
<TOTAL-COSTS> 6,325 5,409 11,928 0 10,607
<OTHER-EXPENSES> 0 0 0 0 0
<LOSS-PROVISION> 0 0 0 0 0
<INTEREST-EXPENSE> 667 1,138 810 0 2,025
<INCOME-PRETAX> 6,694 1,163 5,254 0 (2,848)
<INCOME-TAX> 1,127 35 904 0 (85)
<INCOME-CONTINUING> 5,567 1,128 4,350 0 (2,763)
<DISCONTINUED> 0 0 0 0 0
<EXTRAORDINARY> 0 0 0 0 0
<CHANGES> 0 0 0 0 1,780
<NET-INCOME> 5,567 1,128 4,350 0 (983)
<EPS-PRIMARY> 0.17 .04 0.13 0 (0.03)
<EPS-DILUTED> 0 0 0 0 0
<FN>
<F1>Bonds include convertible subordinated dedentures and other long-term debt.
<F2>Includes Common, Class A and Class B Stock
</FN>
</TABLE>
